Expectations of another rate hike by the Federal Reserve to tame stubbornly high inflation helped push a closely watched part of the US Treasury yield curve to its deepest inversion since 1981 on Monday
People are seen on Wall Street outside the New York Stock Exchange in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid
The U.S. central bank has hiked interest rates aggressively over the last year to fight inflation that hit around 40-year highs and remains above its 2% target rate. as investors increasingly expect the Fed to raise its benchmark borrowing rates to keep inflation in check. Rate futures markets reflect a greater than 80% chance of a quarter-point hike later this month but much less conviction the Fed will proceed beyond that, even though Fed officials said in June a second quarter-point increase was likely by year end.
Here is a quick primer on what an inverted yield curve means, how it has predicted recession, and what it might be signaling now.The yield curve, which plots the return on all Treasury securities, typically slopes upward as the payout increases with the duration. Yields move inversely to prices.
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